The IT market in Poland in 2015 turned upside down

Looking at the results of companies included in the ITwiz Best 100 ranking you can see that the largest upheaval, after years of relative “stability”, was caused by the division of HP Polska into Hewlett Packard Enterprise and HP Inc. and… the immense popularity of the game ‘Witcher 3: Wild Hunt’, developed by the CD Projekt RED studio.

Since the late 1990s Hewlett-Packard has been the undisputed leader of Polish IT market. In 2015 this company’s revenue was responsible accounted for 10% of the entire Polish IT sector, estimated at PLN 34 billion. This year HP Inc. was ranked 7th in our ITwiz Best 100 ranking (revenue estimated at PLN 1.6 billion), and Hewlett Packard Enterprise – 8th (PLN 1.59 billion). From August 1, 2015 both companies operate in Poland as independent entities. The division plan was announced in October 2014. HP Inc. is now focused on developing the range of personal computers and printing equipment, HP Enterprise (HPE) is focused on selling solutions and services for enterprises.

Changes at the forefront of international manufacturers in Poland.

As a result of division, HP Inc. and HPE lost the leading position, and are ranked even lower than their direct competitors in the ITwiz Best 100 ranking. Lenovo, the largest competitor of HP Inc., was ranked 5th this year, with revenue on the level of PLN 1.87 billion, and IBM Polska, a competitor of HP Enterprise, was ranked 6th (PLN 1.75 billion).

PLN 41 billion is the value of the Polish IT market converted to Polish zloty. In dollar terms, its value hovered for a number of years around USD 11 billion and the breakdown into the sale of hardware, services and software was 52%, 30% and 18% respectively.

If distributors of IT solutions, such as AB, ABC Data, Action and Komputronik and Tech Data, who distribute mostly solutions from international manufacturers, were excluded from the ranking, the top five of the largest Polish IT companies would be as follows:

Lenovo Technology B.V. (PLN 1.87 billion).

IBM Polska (PLN 1.75 billion)

HP Inc Polska (PLN 1.6 billion)

HP Enterprise Polska (PLN 1.59 billion)

Dell Polska (PLN 1.4 billion)

They would be followed by: Microsoft (PLN 1.35 billion), Asseco Poland (PLN 1.31 billion), Asus Polska (PLN 0.73 billion), Oracle Polska (PLN 0,72 billion) and Qumak (PLN 0.71 billion). Right next to the podium, but not on it, would be CD Projekt with a nearly 20-fold increase in revenue. And all of this due to the sales figures of the Witcher 3: Wild Hunt game. According to the company’s representatives, all three parts of the game were sold in more than 20 million copies. CD Projekt can also boast the largest gross profit among IT companies in Poland (PLN 414 million), larger even than that of Asseco Poland, the hitherto undisputed leader in this category (PLN 298 million). For CD Project the gross profit accounted for 58% of he company’s revenue in 2015.

Export is strong with the strength of Polish programmers

Nearly 95% of CD Projekt’s sales comes from export. Therefore, this company occupies the first place among the largest exporters of IT products and services in Poland in 2015 with its revenue nearly twice as large as that of the next company in the ITwiz Best 100 ranking, namely Wincor Nixdorf. The top five of the largest exporters in Poland include:

CD Projekt (PLN 665 million from software sales)

Wincor Nixdorf (360 million from the sale of IT hardware and services with 80% and 20% shares, respectively).

Atos in Poland (PLN 325 million zloty)

Ericpol (PLN 318 million from the sale of IT services)

Comarch (PLN 314 million from the sale of software and IT services)

Traditionally, the largest share in export by companies operating in Poland is taken by revenue from IT services based on the quality of work of Polish programmers, including in particular, development of customized software as well as outsourcing and ‘hiring out’ of employees. The total volume of revenue from export of services by companies included in the ITwiz Best 100 this year is more than PLN 1 billion. For software sale it was PLN 840 million, and IT hardware – PLN 414 million with large, approx. 30% share by NTT System. Actually this company is, in addition to IT distributors, the only Polish manufacturer of computers and mobile devices.

Traditionally, the largest share in export by companies operating in Poland is taken by revenue from IT services based on the quality of work of Polish programmers, including in particular, development of customized software as well as outsourcing and ‘hiring out’ of employees. The total volume of revenue from export of services by companies included in the ITwiz Best 100 this year is more than PLN 1 billion. For software sale it was PLN 840 million, and IT hardware – PLN 414 million.

The ITO service centers for foreign customers, based on Polish programmers, were set up in Poland by companies such as: Luxoft, Tieto, BLStream, Sii, or C&F. These five companies together hire more than 5100 employees. In 2015 Luxoft increased its headcount in Poland more than threefold. The company is planning to hire 500 more in 2016. Programmers in Poland are also sought-after by GFT Polska, offering its services to 10 largest investment banks in the world (it intends to hire 200 people) and Crossover from the USA (looking for 1000 programmers).

In addition to international companies offering nearshoring services, there are Polish companies, like Ericpol and SMT Software. The latter is merging with BLStream from Finland. This is the result of an investment made in both companies by the Enterprise Investors fund. The Polish headcount of the new company is 1050 out of a total of 1200 employees. The merging BLStream and SMT Software operate in 9 locations in Poland, in: Szczecin, Wroclaw, Warsaw, Poznan, Katowice, Bialystok, Krakow, Lublin and Lodz, and two locations in Germany – Munich and Regensburg. The company intends to hire 500 person in total by the end of 2016, and increase the headcount to 2000 by the end of 2018.

The weak exchange rate of the Polish zloty had a very strong impact in the Polish IT market

The value of the Polish IT market hovered for a number of years around USD 11 billion (one year ago it was USD 10.8 billion), and the breakdown into sale of hardware, services and software was 52%, 30% and 18% respectively. For a number of years we have also witnessed “crawling growth” in the Polish IT market, on a level of 2-3% per year. This year the situation was upset a bit by the slightly higher, average annual exchange rate of the US dollar, which in 2015 was PLN 3.77, and a year earlier it was PLN 3.16. Therefore in Polish zloty terms the value of the Polish IT market grew from approx. PLN 34 billion to more than PLN 41 billion.

The total revenue from the first 100 of the ITwiz Best 100 ranking is PLN 46.2 billion (PLN 41.3 billion, up by 12%), and for all companies in our ranking it is PLN 49.3 billion (PLN 44.1 billion, up by 12%). However this amount does not present the true picture of the IT market in Poland, because the same revenue is added up multiple times. It recorded by the international manufacturers, their distributors, then resellers and finally, by integrators. Therefore we have always been using amounts indicated by analytical companies. This year the content partner of the ITwiz Best 100 report is the PMR research company.

For the first time the three largest IT distributors in Poland – AB, ABC Data and Action, separated for us the sale of IT products and services from their revenue. The largest share in the sale of IT solutions is held by Action (91%), and the smallest one by AB (61%). For ABC Data the share is at 70%. For AB the second segment in terms of size is the telecom solutions, including smart phones and accessories (26%) with their sales already reaching PLN 1.1 billion.

The effect of the aforementioned, sudden foreign exchange rate changes in 2015 can be seen, among others, in the results of international manufacturers. For example, IBM Polska, in addition to services, sells its solution in Poland for US dollars (hardware) or euros (software). In dollar terms the company revenue grew by approx. 3%, but converted to Polish zloty, by approx. 21%.

Probably the changes in exchange rates also affected the results of some Polish integrators. In particular those taking part in infrastructure projects. For example, Qumak, in spite of as much as 26% increase in revenue from PLN 562 million to PLN 709 million, recorded a net loss on the level of PLN 9.8 million (a year earlier the loss was PLN 7.9 million) As Marek Tiahnybok, the acting board president wrote in May this year: “The decisive impact on the result was caused by the changes in the method of presentation of the potential cost of implementation and maintenance, however, it is a one-off effect„. However, last year Qumak completed construction of several large data centers for the PKO BP Bank, the National Clearing House, the Warsaw Water and Sewage Utility, and also deployed a private cloud for the Military University of Technology and construction of a supercomputer for the Center for Mathematical and Computational Modeling of Warsaw University, based on Huawei hardware.

Distributors separated IT from other revenue

For the first time the three largest IT distributors in Poland – AB, ABC Data and Action, separated for us the sale of IT products and services from their revenue. The largest share in the sale of IT solutions is held by Action (91%), and the smallest one by AB (61%). For ABC Data the share is at 70%. For AB the second segment in terms of size is the telecom solutions, including smart phones and accessories (26%) with their sales already reaching PLN 1.1 billion. Among others, AB is a representative for Apple. The remaining 13% of this company’s revenue (PLN 553 million) comes from other activities, among others from the sale of consumer electronics/appliances as well as toys, and even gym equipment and electric scooters.

The distributor ranking second in terms of the sales volume of telecommunications solutions is ABC Data with its share at 19% and revenue at PLN 816 million. The remaining 11% (PLN 472 million), covers, among others, washing machines, freezers, refrigerators, driers, microwaves, ovens, both stand-alone and built-in, and in the consumer electronics category – TV sets, multimedia projectors, audio equipment. Action, in turn, announced recently that it is going to become a distributor of food.